Exclusive-Zambia’s SEC sanctions Standard Chartered over China property bond mis-selling, source says

By Mark Jones and Chris Mfula

LONDON (Reuters) – Zambia’s Securities and Exchange Commission (SEC) has sanctioned Standard Chartered for misselling bonds of a Chinese property company to one of the bank’s wealthy local clients, at the height of the Asian country’s real estate crisis, a source said.

A source familiar with the matter told Reuters that the UK-based bank, which is currently seeking to sell its wealth and retail banking business in Zambia, faces “enforcement action” for two violations of SEC rules following a months-long investigation.

The first was that he failed to disclose “material information” about bonds sold in March 2022. Those bonds, issued by state-sponsored Chinese developer Sino-Ocean, defaulted a year later and, like many in the sector, are now: almost worthless.

In addition, the SEC found that Standard Chartered also used “exclusive” contractual clauses, meaning the customer bears all responsibility for the risks, which is against Zambian securities rules.

In a statement to Reuters, Standard Chartered said: “We respect the findings of the Securities Exchange Commission in Zambia, however, in accordance with appropriate local procedures, we will respectfully exercise our right of appeal.”

“We are fully aware of this issue and we are looking into the necessary details to clarify the situation. Our priority at the bank is to ensure compliance with regulatory standards in all our markets.”

The SEC, which opened an investigation into the case in April, said it was unable to comment on the matter when asked by Reuters.Under Zambia’s securities law, Standard Chartered now has 30 days to file an appeal.

Zambia’s SEC has the power to fine, or publicly or privately “repress or reprimand” lenders, although it cannot formally order them to compensate customers for mis-selling.

Reuters was unable to ascertain what penalty the regulator plans to impose on Standard Chartered.

The lender said in November it wanted to sell its wealth and retail banking businesses in Zambia, as well as those in nearby Botswana and Uganda.

It has operated in Zambia for nearly 120 years, making it the oldest bank in the country.

It is currently reducing its overall footprint in Africa, but has also sold its Tanzanian business and subsidiaries in Angola, Cameroon, Gambia and Sierra Leone over the past few years.

(Additional reporting by Chris Mfula in Lusaka. Editing by Elisa Martinuzzi and Mark Potter)